Herzog Heirs Win Again in Appeals Court on Jurisdiction Over Hungarian Museums

Art Law Report 26 June 2017
By Nicholas O'Donnell

A federal appeals court has upheld the growing consensus that the Foreign Sovereign Immunities Act (FSIA) confers jurisdiction over foreign state actors in possession of art allegedly looted by and/or overseen by the Nazis.  Upholding last year’s District Court decision, the U.S. Court of Appeals for the D.C. Circuit affirmed the ruling in De Csepel v. Republic of Hungary that denied several Budapest museums’ motion to dismiss, while allowing the Republic of Hungary itself out of the case.  This is the heirs second successful trip to the appellate court, where their claims were upheld in 2013.  The case is the subject of a chapter in my newly-released book A Tragic Fate--Law and Ethics in the Battle Over Nazi-Looted Art (ABA Publishing). 

David de Csepel, Angela Maria Herzog, and Julia Alice Herzog filed the case in 2010.  They are the heirs of Baron Mor Lipot Herzog, a Jewish Hungarian collector who died in 1934.  His remarkable collection included works by El Greco, Velázquez, Lucas Cranach the Elder, van Dyck, Courbet, and Corot.  The case alleged that collection was first taken away from the family starting with the German occupation of 1944 after years of increasing persecution, including the death in a forced labor camp of the Baron’s son András. 

The so-called expropriation exception of the FSIA has become the focus of litigation against foreign defendants.  It was the basis for jurisdiction over the Thyssen-Bornemisza Collection in Madrid in federal court in Los Angeles, and was the foundation of the opinion earlier this year finding Germany and the Stifung Preussischer Kulturbesitz in Berlin over claims to the famed Welfenschatz collection in the same federal court in Washington where the de Csepel case is pending.  The expropriation exception, simply stated, means that if the claims concern rights in property taken in violation of international law, and the defendants are engaged in commercial activity in the United States, they may be sued notwithstanding the general concept of sovereign immunity.  The battleground in these cases has tended to focus on whether a particular plaintiff’s claims concern “rights in property taken in violation of international law.” 

The Court of Appeals decision is significant because it adds to the consensus that the Nazi-supervised looting of art was a crime of international law, whether or not the act involved crossing the borders of a sovereign nation.  Spain, Germany, and Hungary have all urged courts at various points to excuse the conduct of German or Hungarian state actors of takings of property within their own borders as a basis for jurisdiction.  Building on another case against Hungary involving its state railroads’ complicity in the deportation of Hungary’s Jews, this month’s decision confirms that one need not (and a defendant may not) parse the precise starting point of the murderous phase of genocide (as Germany shamefully tried to do in 2015 in trying to backdate the Holocaust start date), it is all of a piece.  The deprivation of economic means to survive is just as central to the genocidal act as the later physical destruction.  Germany, and Hungary, stripped its residents of rights in property as part of their efforts to dehumanize and destroy them.  That is enough. 

The Hungarian defendants were unsuccessful in urging the court to dismiss the claims as preempted by a 1947 treaty that addressed property claims.  Because the Herzog heirs were not U.S. citizens when the treaty was enacted, the plaintiffs persuaded the Court of Appeals to affirm the result that the treaty does not bar their claims.

The case was also interesting in its decision to allow Hungary itself out of the case.  The commercial activity prong of the expropriation element has two clauses, once concerning foreign nations and one concerning their “agencies or instrumentalities.”  The Court of Appeals applied a more stringent test to Hungary’s alleged commercial activity and held that it was insufficient to confer jurisdiction, while finding that Hungary’s museums—its instrumentalities—did meet the standard.

Some of the Herzog collection had been recovered by the Allies and returned to Hungary.  Hungary entered into a treaty in 1947 that addressed in part Hungary’s role as custodian of heirless works.  Hungary did return some of the collection to Herzog family members, but they later characterized that term as “on paper” or in the form of short term loans only (a description that Hungary contests).  Under what they deemed harassment, the family allowed some of the works to return to the Museum of Fine Arts for display in 1948.  The Herzogs engaged in a series of correspondence about the collection, from which, the current plaintiffs allege, a bailment resulted.  Bailment is simply the act of entrusting an object to another; a coat or car check are the most common examples.  Under a bailment, there is no ownership transfer, and the bailee (the person getting the property) is obliged to safeguard it and give it back upon demand. 

Decades later after the fall of Communism, the family restarted its efforts.  The Baron’s daughter Erzsébet negotiated the return of six less significant works before her death in 1992.  Martha Nierenberg, Erzsébet’s daughter, pursued legal action in Hungary.  Initially, the Budapest Municipal Court recognized their claim and awarded ownership of eleven paintings, but in January 2008 an appellate court reversed the decision.  The Herzog heirs have consistently characterized that reversal as politically motivated.

This is an important decision that will bolster the jurisdictional footing of pending and forthcoming restitution cases.
© website copyright Central Registry 2024